i don't know if it's true because it would be a huge mumt pell, but i do like alexion as a company. like i said, always try to find it. i'm jim cramer and i will see you monday. they're often and running. the bulls running in spain and here on wall street as well. >> highly monetary policy for the foreseeable future is what's needed in the u.s. economy. >> investors can thank mr. bernanke, so can we. otherwise stacking up as a boring news day turned into anything but. the dow add 15,440, if the dow were to close here, the highest close in the history of the dow. [ closing bell ] >> on wall street the dow and s&p 500 close at a new all-time high. >> the dow is finishing positive. look at record close, perhaps for the dow and the s&p, 13-year

high for the nasdaq. >> the dow jones industrial, at an all-time high. 16,451, where the index is is closing. uncharted territory. ah, the sights and sounds of what turned out to be a historic and exciting week for wall street and right on cue we end the week with new all-time closing highs for the dow and the s&p 500. welcome to a special report on this record-setting week for the stock market. i'm big griffith in for larry kudlow who's still under the weather. larry if you're watching, why are you watching, first of all, second, feel bet around get back soon. joining me for the entire hour, courtney reagan. what a week. >> incredible week. we were up, down, one week with bernanke, even the other. fed speaking in multiple different languages. one said one thing, one the other. hard to keep track of, really. >> volatile markets out there now. right? talk stocks. all three indices ended positive

after surge late in the day. the s&p and dow close at record highs. 13 year high for the nasdaq. and equity strategist at the seabort group and stephen ra shuuto, a passport renewed made his way across the hudson river into new jersey. we're grateful. >> my pleasure. >> what did you make of this week and what bernanke said, he didn't really say that much different, but the markets took off on thursday. >> yeah. the markets looked at the fomc minutes, fell they were dovish more than anticipated and read into what bernanke said. what i think he intended to say back at the time of his press conference and the market basically adjusted. look at treasury market, for example, we only moved about 10/32. equities took it, said we don't have the to worry about substantially higher short-term interest rates for quite some time and equities are adjusting. people are grabbing for yield. >> abigail, the markets hear what they want.

during a news conference said the same thing and markets sold off. now we're at record highs again. >> great point, though. when i first saw the market reaction to the june statement and then the subsequent press conference to me it was really a false initial reaction on the part of investor. we saw that in gold, in the stock markets. to some extent certainly saw it in the treasury market. i agree. i think bernanke really said nothing new this week. investor are choosing to interpret it in a different light. when we look at this week's move, it was parabolic in nature suggesting high emotion. maybe irrational behavior. what it really means is a reversal back down. i think as quickly as we went up over the last two weeks, coming right back down into a range that range is volatile, speaking about everything that you spoke about, courtney. i think it's likely to resolve at some point this year to the down side. we have so much uncertainty out there. a eurozone crisis that's starting to fester. potential credit crunch in china. here in the u.s. we have rising

gas prices. we also have, u.p.s. this morning, shocked investors did not take that preannouncement and guide them more slayers. we've seen the same out of oracle, caterpillar, other big multi-national companies. >> building a wall of worry, abigail. >> amazing. investors are looking past it. only so long the smoke screen of federal bank support can last and hold up markets. at some point the profit outlook will be hit. how can we have the multi-nationals talking about a slowing economy and not hit the bottom line? >> interesting, too. hearing strong economic data. you still have walmart, the world's biggest retailer having a crummy quarter. >> agreed. >> really concerned about the consumer, the date taye says one thi thing. the income consumer is making, it's concerning. i'm not sure how strong they are. >> i agree with you. we think about rising gas right now. i think back to 2008. i was living in suburbia at that time and just remember there was a six-month period during 2008

where you could really feel it crunching into people's pocketbooks and people were starting to car pool. a short period of time. it hit into the consumer. a shaky consumer now. payroll tax. still a debt ceiling resolution, too. all uncertainty and even bernanke introduced uncertainty now. consumers don't feel great about it. not surprising. >> are you worried about the rise in interest rates? we've seen along this, are you concerned about the rise of oil prices, all of those things that make things, make money cost that much more? >> without a doubt. when you look at the economy, though, going forward. all the economists on wall street have estimates of 2.5%, 3%. same for the first half of the year. the first half of year, average, 1.5%. probably average about 1.5% in the second half as well. the distinction, look where the economy son a perspective relative to the economy and where the marketplace. equity a little above all-time high. not far above it. the economy is back to its old time high. earnings back to their old time

high. we're not looking at a real risk of a major sell-off in the marketplace. ask yourself, how much more up side potential? this year is a great year. up 18-plus percent. will we getanother balance over the end of the year or end up 15%, and corrections down to 10% and back up another 8%. the kind of volatility over the balance of the year because of the facts you laid out. >> let's talk about that. a dramatic week for the economy. much of it positive. earlier today on "squawk on the street" jamie dimon gave his take on the economy. let's listen. >> our view is that it's actually strengthening, very broad based. almost no sector. large company, no more company, small business, consumer, housing -- >> the economy improving. you've seen that disintegrate. right? >> just got same-store sales. not at robust of reporting as we used to get.

nine drug store retailers. what we've seen is good and a lot at play there, too. weather, a funny thing to talk about. the weather does make a difference in retail. >> they use that to their advantage, if the weather is good -- then they had -- >> true. >> better sales for the summer items but didn't sell sweaters. the weather's bad, didn't sell summer items, but sold a lot of sweaters. >> true. june was a really hot month. people going to the mall for air conditioning. good trends going in back-to-school for the second half. actually very, very important. >> is the consumer in this economy right now? >> income growth is growing around 2%. that's best you'll get out of consumers. consumers, 3/4 of the economy bringing you back to 1.5%. inventory one quarter, get to 2%, lose inventory, you get to 1%. that's why average is 1.5%. not changing. we need to create good, well-paying jobs. we're not doing that. we're creating low-paying, temporary jobs.

that's the fundamental problem. and that doesn't go away quickly. the one ning to keep in mind, i think before interest rates moved up there were a lot of corporations that were sitting there saying, earnings growth isn't good. and it hasn't been good for the past few quarters. maybe i have to go for revenue. that was an important transition. the problem now is with interest rates backing up, putting a lot of those plans on the back burner. >> right. >> that puts us back into a 1.5% type trajectory for the economy. i don't see it changing. >> do you like retail stocks? >> not a sector i like so much here. i think we're going to see a broad based market sell-off in the second half. you make a great point about second half growth. the last couple of years everybody's talking about the second half trajectory. when will it come? what second half are we talking about? i don't see what's going to get us kicked into the next level. >> what about -- >> the economy or stock market. >> what about quantitative easing? it's carried us this far? >> interesting point. >> that's not going anywhere. if the commit isn't growing

faster, bernanke won't take it punch. not drain the punch bowl much less take it away. >> because of the uncertainties in volatility on a global level, we could see the economy start to take a hit here potentially around the payroll area and that that economic weakness here and around the globe could actually cause a flight to safety and future qe. however, in the course of that, we could see market volatility to the down side. >> averaged just under 200,000 job as month for the last four reports. do you see that growing more? >> number one, that number i think is heavily overstating the actual employment numbers. if you look at the job labor and turnover data, employment numbers implied, that number is about 147,000. there's something going on. when you look at the initial employment claims numbers you look at jobs minus jobs -- all the other market indicators. none are consistent with where

payrolls are. payroll down, and come back from looking at it saying, income wasn't as strong. that explains why the first half of the year wasn't strong and sit back and think twice about your second half assumptions. with the gdp revisions coming out later this summer, a lot of people expecting upward. they don't get it, watch they cut in second half growth. >> tapering is off the table? a couple weeks ago ben bernanke was talking ak beginning the tapering process maybe in september. and finishing it by the middle of next year. right about now next year. if we don't get -- >> 2014? >> what's that? >> our goal, 2010. >> begin to slow down? >> long as the data is. >>. yeah. 2013, made no sense. september is too close to the christmas season. december is right on top of of the christmas season. do you want to take a chance after the weak first destroying the second half of the? year the concept of september tapering, to prezusumptuous on e part of the fed and market.

>> stock market has to go higher. why not? give us all the reasons why not to invest? i'm not picking on you specifically, but a lot of analysts come through here and say you shouldn't do it, job growth not there, revenue growth not there. you know japan is suffering now. china slowing down. get those numbers we'll talk about later. all the reasons not to invest in the stock market and here we sit with an all-time high again. >> i agree, bill. goes back to some degree to the smoke screen of central bank liquidity. it's helped not just confidence but it's certainly anchoring the profit yot outlook, but that corporate profit outlook in the u.s. could take a hit soon. if that happens you'll see stocks start to decline. i think the really important question here is, are we in the next leg of a new bull market or even an extension of the last bull market for a secular bull market or will he drop down? i don't see the signs for the next leg of the new bull market and think we're going back down

into a very wide volatile range. not just for this year but over the last 15 years. so much uncertainty plaguing the system at hole. >> steven good to see you. thanks for joining us toercht. have a good weekend. >> you, too. >> abigail, you're in the finished. you'll be back in a little bit. coming up, eamon javers about to continue his excellent reporting on the tricks of the trade in high frequency trading. his report focuses on an innocent-looking building in washington, d.c. there's more to this place than you think, and a lot of investors are angry about that. that's coming up next. ♪

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welcome back. i'm bill griffeth in for my friend larry kudlow. hoping he's back monday, not feeling well but he'll be okay. high frequency trading is not limited to wall street. it's on k street. hidden business behind gaining access to government economic data. first apparently some trading houses are willing to pay big money to put their servers closer to the offices that

release such data cnbc's eamon javers doing a great job wit story. he joins us with details. eamon? >> reporter: a lot of people know about wall street collocation when high-speed trading terms put servers next to the exchange servers positive minimize a delay in computerized trading. a lot of people don't know, though, that location is going on right here in washington, d.c. it's all about getting market moving economic statistics that the u.s. government puts out and getting them first within a millisecond or less after released and trading on that information. why i'm standing here in front of 1275 k street. this building behind me is the home to a server farm operated by a company called core site, trading firms can co-locate with exchange servers to suck the information right out of washington and get it to new jersey as quickly as possible. why is this building loeshgted here on this block? it's all about location, location, location. this building is just over 6,000

feet away from the department of labor where the monthly jobs numbers is released and the department of energy. where information on natural gas inventories comes from. even closer to the department of kmes, under 4,000 feet away. and closest of all is the department of treasury where they release the fed's fund rate decisions to the press just 2,640 feet away from where i'm standing now. now, the firm that operates this facility didn't want to talk to us for this story. on the market material on the web they say, washington, d.c. collocation facility offers customers interested in receiving low agency economic and government news more than a millisecond advantage over suburbs such as ashburn, virginia. high frequency trading environments a millisecond difference is a major advantage for filling more trades at better prices. guys, i can tell you that a lot of the firms we talked to for this story did not want to talk to us on camera or on the record at all, but nasdaq operates servers in this facility and said the whole effort here is about getting the government

information as soon as possible after its released. not before. but as soon as possible after the information becomes public. that's the situation in the big business of federal government data. back to you. >> eamon javers, great stuff. thank you. are the markets on fair? is high-speed trading ruining wall street? joining us, william black, associate prompt economics and law at the university of kansas city and also former federal banking reg laterer joining abigail and courtney reagan with me tonight as well. what's your answer to that question? is high frequency trading when we consider this collocation issue, and proximitity to economic data giving a millisecond advantage is that unfair? should it be legal? >> well, you can't make it illegal in any practical way as long as you allow high frequency

trading. it doesn't help society in any single way. this is just to give one trader an advantage over another, no competitive advantage to society. >> let me ask it this way. >> there's no real up side. >> let me ask it this way -- is anybody hurt by having these collocation centers in washington, d.c.? >> sure. people on the other side of the trade that don't have the information are hurt. if you're asking more broadly what we've seen ever since the enron scandal is the withdrawal of enormous numbers of less sophisticated financial participants, because they think the system is rigged in favor of the big guys, and the system is rigged in favor of the big guys which is why you continue to see even in a record bull market very low levels of participation by regular people compared to the past. >> abigail i know you're not a

fan of high frequency trading. are you? >> bill, it's hard to be a fan of this. it's just morally, it feels unfair to give the guys with more money the ability to make more money, more quickly than the small guys, plus when we look at high frequency trading it creates false liquidity and takes out the essence of trading in a way. back in the day, people running ticket orders. now entering these orders into the electronic exchanges and without rhythmic didn't didn't it really just doesn't have the same essence of what stock trading used to be back in the day. the unfair advantage on many levels. it's hard to like. >> i haven't decided how i feel about this. >> really? >> i'll be frank with you. my thought is, if we never changed, we'd still be in caves. still be there. we sit here, bill black, tonight at all-time highs for the stock market. you know, nobody's hurt by that.

and yet we complain about this high frequency trading as if -- you know, it's hurting the system. or it's hurting the market, yet here we are. it just feels to me like it's off in a lot of sour grapes on the part of individuals who only aer don't have the wherewithal or knowledge to participate in high frequency trading. again i ask, who is hurt, other than the guy on the other side of that trade? >> well, how can you say "other than" half the people involved in the trades? >> that's true of any trade out there. you know, anything in the futures market is the a zero sum game. you get a winner for every winner there's a loser, and you have that in the stock market as well. why should it be different when it's high frequency trading? >> will are lots of markets that are not zero sum and you don't want to create a zero sum where it only benefits the wealthy. in particular it's not going to stay with this advantage which comes from co-election. we've seen that.

and i am a proud graduate of the university of michigan. two degrees from there, but their actions were reprehensible with thompson reuters in telling access, i think on a two-second advantage, whiches in high frequency trading might as well be two days advantage. >> right. >> and we're seeing that. we see the abuses in the dark pools. they're regulatory actions today being proposed, because of similar violations. it won't stay. as long oos you can make a tremendous amount of money by getting the stuff, literally, a millisecond earlier than you're going to want to, incentive, bribing a public official. not to cheat, route it through this stem as opposed that that system. where that public relief will occur is critical. if a new politician comes in and moves the department of labor release to a different location in washington, d.c., or in colorado, boom. all of this is out the window,

and you're going to have people bidding for politicians to, where you were going to locate the information. >> you sound surprised when i said i hadn't decided yet? >> yes. i put a lot of stock in the psychology of trading and investing. if i'm a regular guy and want to make sure i'm making smart decisions, sometimely decisions, just hearing about this makes me uncomfortable. it makes me not trust the markets. similar to what abigail was saying. whether or not i can really make an action in a millisecond, in a real sense -- >> you're not doing it anyway. you've got the computer doing that for the you. right? >> that's true. it just feels wrong. maybe i'm a simple girl from ohio, were ut it doesn't feel right and makes me not trust what's going on there. >> and makes it more of a game. takes the actual art of investing looking at the fundamentals of a company doing what i do looking at chart technical, it takes that away. >> we've got to move on. but i don't get it. you are a very smart woman and can look at a chart and decide

to buy or sell that stock based on that information. and what high frequency trading had to do with all that, i don't know. nothing. right? >> well, it -- >> what's that? go ahead, bill i. can tell you the answer to that. >> what? >> can you not do as a regular person what a high-frequency trader does. that's why we have more cancelled orders today than we used to have orders. >> right. >> as of about a year and a half ago. and that's because they are trolling for information and looking to actually move the markets with their purchase orders that they then move away from. >> and how did that hurt -- >> you cannot do that. >> how did that hurt my mother's portfolio that's sitting there, you know -- presumably going up while, you know, all the markets are going up at this same time? how did she get hurt by all that? >> i don't know that you can -- >> you don't you it don't look in the bull market. you look after what happens when, for example, you get a flash crash. where you have vastly increased

volatility, and where, again, it's disputed, but lots of people believe, including the sec, that the high frequency trading did, in fact, add to that volatility. >> and i -- >> that was done just a little entity out here. >> i get it. >> bill and reed, they believe. >> volatility is part of the game. we had the flash crash a couple years ago, yet here we still sit at all-time highs tonight. >> in the end, who got hurt? the people that -- >> china. >> well, we've got the chinese number comes up sunday night. we'll talk about that. >> no, no. wait until china creates this kind of flash crash. >> then the volatility goes up by exponential amounts. i guess. thank you for joining us. bab gayle, good to see you. >> i'd love to talk more but we must move on. a look at other dramatic stock and biz news today in respect could be anything more dramatic is there? than the return of the beloved twinkie?

we're cutting back on high frequency trading debates for the twinkie? guess what? the union that helped bring the twinkie down is now trying to rain on that snack cake parade. we'll come back with that in just a moment. hey! did you know that honey nut cheerios has oats that can help lower cholesterol?

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the last thing i want is to feel like someone is giving me a sales pitch, especially when it comes to my investments. you want a broker you can trust. a lot of guys at the other firms seemed more focused on selling than their clients. that's why i stopped working at my old brokerage and became a financial consultant with charles schwab. avo: what kind of financial consultant are you looking for? talk to us today.

twinkies are back on store shells today. thought it was monday pap great relief to many of us. and seema mody has that story and more. >> a lot of big movers. u.p.s. down big today almost 6%, bill. u.p.s. cut its second quarter and full year earnings forecast. u.p.s. says customers are switching to cheaper shipping options. it also sees weakness in the u.s. industrial economy. netflix hon a tear back to its highest level in nearly two years. barclays raised its targets because of hopes for strong growth. netflix has more than 36 million streaming customers. a big deal breaking out for the bell. at&t paid $1.2 billion for wireless amounting to $15 a share. the deal gets at&t 5 million more subscribers. this story breaking tonight.

former aig filing suit against eliot spitzer saying he made defamatory statements against him related to greenburgh's ten you're at aig. greenburgh is referring to comments spitzer maide to the nw york law journal, spitzer said he ran aig in a corrupt way. spitzer is now running for new york city comptroller. and bill a story you've been waiting for. >> i have. >> this is a video of twinkies loaded on to shelves at walmart stores today. other stores will be getting them back in stock over the next few days. hostess went bankrupt last year, in part because they couldn't reach a deem with unions. a private equity firm bought the brands and making the snack with non-union laybor and a statemen released today saying hostess is using workers with little or no experience and the company's fate is not assured. a story developing. however -- >> what do you have back there? look at that.

>> i know. you go to all of these fancy house parties in new york city, or these dinners. i thought next time, bring the wine, instead bring a twinkie. >> can we have some? courtney hasn't had them since lunch, since her mom put them in her lunches years ago. >> we should. friday night. >> we'll all enjoy those. so that is -- that's a fresh twinkie box? >> it is. >> sort of an oxymoron. fresh twinkies. they need to age for a while. shouldn't they? >> i love the new slogan. the sweetest comeback in the history of ever. that is not good. >> i'm bothered they have a longer shelf life now. they used to have a shelf life, i am told of 26 days. now these 457 d days but won't l us what's differ and why they have a longer shelf life. >> we'll figure it out. >> this bothers me more than high frequency trading. seema, thanks good stuff. and now we know that the fire aboard that parked boeing

787 at heathrow spooked boeing stock today. what we don't know is what caused it. are all the 787s coming back in spades? the latest coming up next. ♪ ♪ designed to draw crowds. ♪ ♪ others are designed to leave them behind. ♪ the all-new 2014 lexus is. it's your move. the healthcare law gives us powerful tools to fight it... to investigate it... ...prosecute it... and stop criminals. our senior medicare patrol volunteers... are teaching seniors across the country... ...to stop, spot, and report fraud.

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welcome back. an ugly day for boeing almost prevented a record day closing for the dow. more importantly the fire on that 787 at heathrow today could mean bigger problems than a huge decline for the company stock. today's fire, the latest in a parade of setbacks for the dreamliner that's been anything but. the first issue came a month after the 787's first domestic flight. then there were four separate issues in little more than a week back in january. now the fire in london plus a separate issue on plane headed to florida, had to turn back. it all adds up to more questions about this plane. joining us tonight with their thoughts, jonathan baskin, his managing director and joining us op the telephone, in san francisco all this week because of the other airline problems. cnbc's phil lebeau. jonathan what do you make of this? we still don't know whether it's

related to the battery or not. right? >> yeah, bill. i think you hit the nail on the head when you talked about that series of woes going back to, really, one of the early flights, passenger flights. this plane has been beset with problems. if you will, the spotlight of attention has been applied to the plane see that what arguably could be otherwise explainable and rather deminutus events get highlighted and brought to the fronted so that today's event, what the stock originally dropped 7% before it recovered at the time of the close. that's not a normal reaction to a fighter on a plane. that was a reaction to an entire track of problems. >> yep. >> so the short-term question is going to be, what really caused it? and i think dependent on that answer, are two very different reputational outcomes for boeing. >> this has been in the spotlight since day one. does it make the problem worse? magnify it? beas i understand everything else they've gone through? >> yeah, well -- >> we're asking phil.

jonathan, hang on. phil, go ahead. >> it absolutely magnifies it. this was a situation for boeing, once they've got the dreamliner with the battery fixed, just getting past the point where you had people constantly asking if the dreamliner was going to be okay. they were increasing production. you talk to top guys regarding the problems with this, the fire what it might be. there are two main issues that investors are concerned about. one, is it battery related? the fact that it's in the crown of the plane, in the rear, and not in the belly near the battery, i talked to people at boeing. they're fairly confident that it does not have to do with the battery. so even if it's not the battery, a second issue of concern which is was it electrical? because this plane is by far, far more complex when it comes to electronics than any other aircraft out there, and if this is a problem that is in all dreamliners, again, we don't know if it is, electrical, the

two issues out there. >> and jim mcnerdy's nightmare. phil, is the 787 a lemon? >> no. oh, no. far, far, no. it would not be volatile. it certainly has had a ton of problems. not minimizing those, but it also is a plane delivering as they said it would for the airlines flying it when it is flying. >> jonathan, this has got to be -- i mean, unions were crying foul on this was being built anyway. a lot of work farmed out, and this may just add to the woes for the company. as they were trying to bring costs down for this huge project? >> absolutely, bill. not only with the unions but all stakeholder groups. when my company looks for reputation, we're not necessarily looking just at public opinions but the decisions stakeholders make. talking carriers that buy planes. vendors that sell things to boeing, creditors, risk managers, evaluations of the

next bond or borrowing event. all of those stakeholders at a minimum will look at boeing and ask to have a couple more questions answered. to phil's point, it may be nothing. may have been a coffeepot or cigarette flung by, a maintenance guy. but it's a different game if related to the battery or electrical system. boeing, i'd argue, ex-peblgded a lot of good will six months agoing when it said, trust us. don't worry, be happy and fly. effectively their answer to fixing the battery problem which they didn't really fix, put a containment thing around it if it caught on fire it would vent out of the plane instead of into the plane. if it turns out to be electrical or the battery, that changes everything. their costs go up for borrowing. risk insurance goes up. >> sure. >> bonds aren't worth as much. stock goes down. at a minimum, they have a lot of questions to answer, because this was such a different process. >> how much, really, then, jonathan, is at stake for investors? 44 million shares traded hence

the biggest volume day on record for boeing? what's at stake? if i'm an investor, thinking about getting in what do i need to think about here? >> yeah. the short answer would be, be very cautious. in so much that -- the real effect on boeing stock price is not going to be whether or not there's another news event. it will be whether or not these other stakeholder groups start exacting, if you will, revenge on boeing for having said, trust us, don't worry. if i had to predict where the stock goes, and i'm in no position to do that. >> nobody is. >> i would suggest that it's probably not going up anytime soon. >> all right. very quickly, phil. any timeline? when doll we know what the problem was? when do we find out, do you think? >> i know boeing is hoping that the investigators in britain give a preliminary assessment by tomorrow. they have no guarantees at this point. >> all right. jonathan, phil, thank you both for joining us. >> thank you. >> all right. it wasn't just a big week for wall street. the federal government found

itself flush with a lot more cash than expected. talking a massive budget surplus. what does it mean? and the great food stamp debate is just getting started in congress. we'll get to those stories when we come back. so... [ gasps ]

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who? (sighs) geico. fifteen minutes could save you...well, you know. welcome back. surprise. uncle sam post add budget surplus last month. you know how much? $117 billion. but get this. despite the country's rising tax revenues, the surplus didn't even make a dent in our nearly $17 trillion debt. isn't this just another sign that washington still has a massive spending problem? joining us tonight, cnbc's contributors keith boykin and jimmy p. courtney is still with me as well. keith what do you say? $117 billion. we're heading in the right direction. aren't we? >> yes, we're heading in the right direction. i think it's good that the deficit is declining. we have a five-year low in the

deficit. and spending is actually declining, too, contrary to the complication in the introduction. 47% reduction in spending last month over last year. last year at this time, a $60 billion deficit. we're definitely in the right direction. i challenge jim or anybody to tell me where is all this mammoth spending they're talking about the government is doing? we've been in a period of austerity. >> haven't said a word and being challenged. >> right. putting words in my mouth and attacking the words i never altered. fantastic. that's fantastic. >> we agree, then. right? >> listen, here's what i think. i think the deficit is going down. i think it's going down dramatically. is possible that until 2016 we might even have a surplus. an annual budget surplus. all that is possible. it's fantastic. the problem is that after about 2017, 2018, the deficit's going back up. a huge entitlement problem and

every year that we won't, don't deal with the problem makes the fixes more elaborate and expensive. we have to deal with the problems. the near term, thanks in part to higher tax revenues and sequesters, spending has gone down and so has the deficit. >> i keep thinking all of these incremental positivedata points are just pushing washington lawmakers further away from coming up with a solid fiscal solution. is that really a concern? you see good data. is it actually bad news? >> if you believe right now the way washington operates is by crisis, and there's not a crisis, they're not going to do anything. you're right. without a crisis, they're not going to do the long-term entitlement reform i just talked about. from that perspective, it's bad news i. think worse than that, because of the republicans in the house what we have now is, we don't have anything going on. we can't get gun control, can't get immigration. definitely can't get a budget

passed. the idea we can deal with entitlement issues is not going to happen in this congress. >> let me bring up the farm bill. it's been a mess. now they've removed at least -- in part -- the food stamps out of there. i'm going to call it s.n.a.p. nobody would know what it is. food stamps came out in the house version so they could pass the farm bill and then they'll deal with the food stamps at a different time. jimmy, i mean -- do they just want to dismantle the food stamp program completely? what's going on? >> splitting those two is great, because it would theoretically make it easier to kill those crony capitalist farm subsidies and deal with food stamps late perp as far as food stamps, i think the best idea would be abolish the food stamp program and take that money -- don't gecht rid of that money,ut it in other programs such at the earned income tax credit. bump up unemployment insurance. more assistance.

nag would help, theoretically, get rid of the farm subsidy, probably a good idea. >> the idea behind linking food stamps with the farm subsidies 40 years ago, would you connect rural interests to one of the farm subsidies and urban to the food stamps, and i think it's worked for the most part fairly well in terms of getting both done. i think jim is participately correct in terms of a need to have some sort of, look at the farm subsidies. why are we paying farmers in some instances no the to grow crops? >> asking that for 60 years. >> i understand that's a legitimate question. i think the larger problem is, you know, this is, again, an issue about the ability of congress to get anything done. i think we have a group of republicans in the house who are not even willing to go along with a bipartisan bill in the senate that has already passed, because they are unwilling to go along with any compromise. this is not a solution for getting anything done. it's bigger than the food stamp program, much bigger. that's a real tragedy nor

america. >> last word, jimmy. >> i'm not going to attack anybody. i was going to say what i said. get rid of crony capitalist subsidies and find a better way to do food stamps. >> there. we've soled the problem. >> what do you think of that? >> i don't know if wep agree. >> time to move on, then. thank you. good to see yyou both. one key number coming out alluding to during the hour that could shock markets monday morning. this is very important. we'll tell what you to watch for coming up next. stay tuned. (announcer) at scottrade, our clients trade and invest exactly how they want. with scottrade's online banking, i get one view of my bank and brokerage accounts with one login... to easily move my money when i need to. plus, when i call my local scottrade office, i can talk to someone who knows how i trade. because i don't trade like everybody. i trade like me. i'm with scottrade. (announcer) scottrade. awarded five-stars from smartmoney magazine.

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welcome back. bill griffeth along with courtney reighen in for larry tonight. if you thought it was it a big week we just finished, next week could be bigger. here are three of the major items investors need to be looking for. first on sunday night, we get a crucial report on china's growth. the gdp number. among other things. later in the week we have ben bernanke's testimony on capitol hill. here we go again, amend, of course, throughout the week, earnings season kicks into high gear. the question -- what's the most important thing to look for next week? let's ask kate warren, investment strategist at edward jones and lee munson, chief investment officer in portfolio llc and the author of "ringed money -- "ringed money." a lot of traders i was talking to on the new york stock exchange, squaring up the books

getting ready for that gdp number from china. >> the china number is less important than the overall aspect of earnings. it's a key week for earnings. lots of companies reporting, and it's hard not to stay that ben bernanke's testimony won't be one of the drivers at least on wednesday and thursday. but i think overall it's the earnings picture that will divert stocks because people are still watching to s ing ting to companies able to deliver earnings in a slow overall sales growth environment. >> and how are you positioning your clients as you look forward to this really big week we're going to have in light of what ben bernanke may or may not say of the china data and the other things we need to watch carefully? >> we think this is a time to be adding equities. >> kate, for lee. >> i'm sorry. >> go ahead. >> you know whaeshgs we're doing right now, i did a ton of bond trading today. concerned about the duration, how long bonds are. what we don't want viewers out there to do, bill or courtney,

dump allocation bonds. we want to narrow it. so we don't have a lot of plong bonds. hon 234e679ly, my crystal ball hasn't worked since 2,000 and we don't know thousand will affect. we want to lower how many calories we spend on the bond risk and then spend all calories on stock. especially in china. especially in the emerging markets, because they have been hit hard this year and earnings, i'm not too concerned. the american economy. the international economy. they're still rolling. again, just reduce the amount of calories you spend on your bond risk, and then jack it up. it's like having a salad, guys. don't put so much bleu cheese. get a bigger steak. >> you feel long rates will continue to go higher, obviously? >> i think it's clearly -- if they do -- you know, overall long term, you do better buying longer bonds than short-term bonds, but here going forward you have to make a decision. we're we're getting the growth we think, long rates will go up. you don't have to decide. but for my clientele, who's

retired, if we have a two or three-year recession in the stock market, they've got to have a bucket they can source money from. so i'm willing to give up some returns on the bond side going long so that people have money to live off of. it's a very important lesson. >> kate, be real. ben bernanke is more important than earnings report. isn't it? haven't we learned that by now? the reason the stock market keeps going up is because ben bernanke keeps buying up treasury bonds and mortgage backed securities. isn't that why we're really talking more about him than earnings these days? >> i think day-to-day what ben bernanke says and what he's doing matters more. i think over time, the earnings matter more. the reason is, if the earnings weren't coming in at least at expectations or a little better, they've been doing for the last few years, i think the market would be much more focused on the earnings problem and much less focused on when the fed may stop buying bonds each month. so i think overall, the reason

that we're focused on the fed it the earnings have been okay. nobody has to pay a lot of attention to them. if that change, the focus will shift back to earnings quickly. >> lee, how fragile do you think the economy is right now? can we handle 3% on the ten-year, 5%, 6% on the 30-year mortgage rate for most americans? >> you know, i think we can. 3% doesn't bother me. 4%, 4 1/4% i'll be concerned. a lot are people are concerned about it affecting the bond market. it's expected in higher expected future growth. in that sense, concerned about higher rates, you definitely should be focused on earnings. what i think people should be doing is focusing on neither. getting the higher risk in the stocks, which means going for the valley, going fue, not to g

cocktail party talking about rates. go to the cocktail party talking about how, adding to our small, value, getting in there and buying stock. >> if you're going to a cocktail party to talk fed policy, i'm not going. appreciate it very much. kate and lee. courtney, a delight. >> great to be here. >> enjoyed it very much. another big event to watch next week, cnbc's delivering alpha conference secretary jack lieu, nelson pelts, u.s. attorney and many more coming up. i'm bill griffeth. thanks for joining us. good night. ♪

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